To recap our previous post, wage discrepancies between employees may only be based on the following bona fide reasons:

A seniority system;

A merit system;

A system measuring earnings by quantity or quality of production (including piece rate);

Workplace location;

Travel (if necessary and regular for employees);

Education;

Training;

Experience; or

A combination of these factors, if they account for the entire pay discrepancy.

Discrepancies attributable to the factors above should be reasonable. For instance, paying an employee who has a master’s degree 10% more than her older colleague with a bachelor’s degree may be reasonable. Paying her 75% more and claiming the difference is due to the higher level of education would likely not hold up in court.

The law also prohibits employers from asking applicants how much they make in their current or former positions, and likewise prohibits employers from asking an applicant’s current or former employers about their wages. This is intended to prevent the continuation of pay discrepancies that could be traced back to an employee’s inclusion in a protected class. If employers come across this information without asking (e.g. the candidate volunteers it), they should ensure that it does not influence their offer.

An employee who brings a successful civil claim against an employer under this law will be entitled to a year of back pay, liquidated damages equal to that amount (thereby doubling the award), and reasonable attorneys’ fees.

No Intent or Bad Faith Required

It is crucial for employers to understand that discriminatory intent is not necessary to violate this law. An employee does not need to prove that she is paid less because she is a woman, or black, or a veteran; if the employer cannot explain the pay differential based solely on the allowable reasons listed above, the employee will win her case. This makes it essential that employers conduct an internal audit of their pay scales to uncover any differences in pay that they are unable to explain.

Negotiation, Desperation, or a Job Seekers’ Market Are Not Acceptable Reasons

Another important takeaway is that negotiation is not an acceptable basis for wage discrepancies, nor will it serve as a defense in litigation. Oregon’s EPA—while not prohibiting negotiation—will significantly limit the situations in which negotiation is appropriate. For instance, while offering a generous bonus schedule and fringe benefits to an applicant for a one-of-a-kind position may be acceptable, wages and benefits for positions of “comparable character” should remain the same, unless the discrepancies can be justified by the acceptable reasons listed above.

Additionally, over-the-top offers made because a position needs to be filled quickly, or because an applicant-friendly job market is emboldening job seekers to ask for higher pay, may prove problematic down the road. The law does not allow for employers to reduce employee pay to comply with the law, meaning that lower-paid employees may need to receive raises instead.

Action Items for Employers

Administer (or hire someone to conduct) an audit of your overall pay structure as well as an analysis of job groups and individual wages. The analysis should focus on whether differences in pay can be fully and reasonably explained by the bona fide factors above. Doing the audit sooner rather than later will allow you to plan for what may be significant changes in pay structure.

Edit any application forms, interview templates, or other documents that ask applicants or their employers about current wages or salary history. If you don’t want to change your practices now, put it on your calendar to revisit these documents in 2018.

Exercise caution with respect to offers or raises, starting now. Because the law does not allow for employee pay to be reduced for compliance, wages that are inordinately high due to factors not on the bona fide reason list (e.g. negotiation, desperation) could necessitate across-the-board increases.

Oregon Governor Kate Brown has signed H.B. 2005 into law, also known as the Oregon Equal Pay Act of 2017. This law aims to reduce persistent pay inequities, and also provides a safe harbor for employers that have voluntarily assessed their pay practices to identify and eliminate discriminatory actions.

Under the OEPA, employers may not “in any manner discriminate between employees on the basis of protected class in the payment of wages or other compensation for work of comparable character.” This includes paying “wages or other compensation to any employee at a rate higher than that at which the employer pays wages or other compensation to employees of a protected class for work of comparable character.” The following are key provisions:

Employers may not ask an applicant how much he/she is currently paid;

Employers may not base a new hire’s pay on that individual’s current or past compensation;

Employers may not comply with the Equal Pay Act by cutting a current employee’s pay.

However, employers may pay employees for work of comparable character at different compensation levels if the difference is due to a bona fide factor related to the position based on:

Seniority

A merit system

A system measuring earnings by quantity or quality of production (e.g. piece-rate work)

Workplace locations

Travel (if necessary and regular for employees)

Education

Training

Experience

Employers that violate the Equal Pay Act may be liable to employees for unpaid wages. Employees may seek redress by either filing a complaint with Oregon’s Bureau of Labor and Industries (“BOLI”), or by bringing a lawsuit against their employer directly. There is no exhaustion requirement mandating the filing of a complaint with BOLI prior to bringing a lawsuit.

Compensatory and punitive damages are also available upon a showing of an employer’s fraud, malice, or willful and wanton misconduct. However, an employer is entitled to file a motion to disallow an award of compensatory and punitive damages, which shall be granted if the employer demonstrates, by a preponderance of the evidence, that it: (1) completed, within three years before the date that the action was filed, an equal-pay analysis of the employer’s pay practices in good faith that was reasonable in detail and scope, and related to the protected class asserted by the plaintiff; and (2) eliminated the wage differentials for the plaintiff and has made reasonable and substantial progress toward eliminating wage differentials for the protected class asserted by the plaintiff. In light of this provision, employers should consider voluntarily conducting equal-pay analyses to identify and rectify instances of pay discrimination.

The bulk of the Equal Pay Act’s provisions become operative on January 1, 2019, giving employers time to address any existing pay disparities.